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Better warranty deals in store

Extended warranties market to undergo radical overhaul in 2004

Consumers will in future get a better deal when they buy extended warranties on domestic electrical goods.

The Competition Commission (CC) has announced a number of reforms to the "unfair and uncompetitive" extended warranty market.

Most extended warranties are sold at point of sale but little factual information is given to consumers, which gives retailers a huge competitive advantage, according to the CC. It also found a lack of competition at point of sale and warranties sold at excessive prices.

The reforms come as a result of an investigation by the Office of Fair Trading (OFT) in May 2002, which found consumers getting a raw deal from the market. The matter was referred to the CC in July.

Retailers and manufacturers will have to put in place a number of changes by the middle of next year.

They will have to show the price of the extended warranty alongside the electrical product, in store and in adverts, and give consumers information about their statutory rights, cancellation rights, and warranty details.

Consumer will also have 45 days to cancel their extended warranty, including a written reminder of this right.

If they want to cancel later on they must be allowed to, and receive a pro-rata refund.

Retailers will not be able to push consumers into buying warranties at point of sale as the same deal must be available for 30 days. Any discounts tied to the purchase of the extended warranty should also be available for 30 days.

Consumers must be advised if their warranty is ringfenced so that they will have financial protection in the event of insolvency of the supplier.

The secretary of state for trade and industry, Patricia Hewitt, said she had accepted the CC's proposals - but warned that the OFT would review the situation in two years' time.

"If they find that competition has not improved sufficiently by then, it might be necessary to take further action," she said in a statement.

One of the leading retailers involved in selling EW is the Dixons Group.

John Clare, chief executive of Dixons, said in a statement: "We disagree with the conclusion that the market for extended warranties is unfair, uncompetitive or that there is excessive pricing. We note that several of the remedies to be adopted are already practised by the Dixons Group.

"We have some concerns about the practicality of others and look forward to discussing their implementation in more detail."